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G20 to combat corporate tax avoidance

G20 finance ministers meeting in Moscow, in particular those of the UK, France and Germany, have issued a communiqué stating that they are determined to develop measures to stop firms shifting profits from a home country to pay less tax elsewhere.

The communiqué also said members would refrain from devaluing their currencies to gain
economic advantage, amid fears of a new "currency war".

A recent survey carried out by the Organisation of Economic Co-operation and Development (OECD) found that multinational firms could exploit gaps between tax rules in the different countries in which they operate.

The UK Chancellor, Mr George Osborne said:
"We want businesses to pay the taxes that we set in our countries. And that cannot be achieved by one country alone."

Mr Pierre Moscovici, the French Finance Minister said they are:
"Strongly determined to fight against tax fraud, tax avoidance, and tax evasion. We must avoid situations in which some companies use international and domestic law to be taxed nowhere."

This follows on from recent revelations about a number of companies, including Amazon, Google and Starbucks that have come under the spotlight for their taxation strategies in recent months. Another giant international company, Facebook, has now been accused of ducking its tax obligations.

The report by the OECD was released earlier this year, and found that:

  • Inconsistencies between different countries' tax rules enable companies to move their profits to lower tax jurisdictions
  • the amount of taxable profits in a given country increasingly depends on hard-to-value intangibles such as intellectual property rights, services or brands
  • international royalties and licence fee payments, mostly paid between different subsidiaries within the same business group, grew 170-fold between 1970-2009
  • tax rules fail to take proper account of the growing volume of e-commerce, which presents particular problems as to which country has tax jurisdiction


Tonmoy Kumar, Manager of the Accounts Department of ABDS comments:
“The UK will chair a committee looking at transfer pricing - how international corporate empires calculate the payments passed between their subsidiaries in different countries, which can be used to shift profits from high-tax jurisdictions to lower-tax ones.”

If you need any help and advice for your business on Corporation Tax or VAT contact Lavinia Newman, Stuart Coleman or Tonmoy Kumar to discuss how ABDS can help

Tel: 023 8083 6900  E-mail: abds@netaccountants.net

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